European markets close higher after UK fiscal U-turn; Stoxx 600 up 0.7%

At its final reverse auction during its two-week emergency bond-buying program, the Bank of England bought £1.3207 billion ($1.48 billion) worth of long-dated government bonds, according to Reuters.

The news agency reported that its total purchases of conventional and index-linked gilts stood at £19.3 billion.

U.K. 30-day gilt yields rose to a two-day high of 4.682% following the speech by Prime Minister Liz Truss.

In the announcement Truss back-peddled on tax policies originally laid out in a mini-budget on Sept. 23, as she attempted to ease market turbulence.

Gilts had dipped earlier in the day on reports of a possible U-turn on Truss' tax plans.

— Hannah Ward-Glenton

Sterling fell 1.25% for the session to $1.1190 following the statement by U.K. Prime Minister Liz Truss.

Truss reversed the decision to scrap an increase in corporation tax in an attempt to quell market turmoil.

— Hannah Ward-Glenton

"It is clear that parts of our mini-budget went further and faster than markets were expecting, so the way we are delivering our mission must change," Truss said in a major news conference Friday.

"I have therefore decided to keep the increase in corporation tax that was planned by the previous government," Truss said.

Corporation tax will now increase to 25%, as originally planned by Boris Johnson's government, rather than remaining at 19%.

"My priority is ensuring our country's economic stability," she said.

— Hannah Ward-Glenton

Jeremy Hunt has been appointed the U.K.'s new finance minister, according to Prime Minister Liz Truss' office.

The move comes after Kwasi Kwarteng was fired from the position earlier today.

Hunt will be the U.K.'s fourth finance minister this year.

— Hannah Ward-Glenton

People are "crying out for clarity, stability and a little calm across the financial markets," Andrew Megson, CEO of My Pension Expert, said in a note.

"If these things cannot be delivered, and quickly, the calls for a general election and change of government will surely become too loud to ignore," Megson said.

"Even after a month of major shocks, this news is particularly momentous. Kwasi Kwarteng leaves with egg on his face, the economy in a downward spin, and Liz Truss' premiership hanging by a thread," he said.

"Forget any political point-scoring or personal agendas, this whole episode - from the mini budget on 23 September through to today's unceremonious dismissal of the Chancellor - has set Britain back at a time when clear, decisive action was needed," he said.

— Hannah Ward-Glenton

Kwasi Kwarteng has been fired as the U.K's finance minister after just 37 days in the role, making him the second-shortest serving chancellor on record.

"You have asked me to stand aside as your Chancellor. I have accepted," said Kwasi Kwarteng's resignation letter to Truss, which he published on Twitter.

The announcement comes shortly before Prime Minister Liz Truss is expected to make a statement on her fiscal plans.

— Hannah Ward-Glenton

U.K. bond yields fell on Friday after it was announced Prime Minister Liz Truss will hold a news conference later in the day. It comes amid mounting speculation that Truss is considering a U-turn on parts of her government's market-rocking tax cuts.

U.K. government bonds — known as gilts — rallied sharply on Friday, hitting a session high on reports Truss will hold a press conference at 2 p.m. London time. Yields move inversely to prices.

The long-dated 30-year gilt yield briefly was down at 4.28% by late morning.

Read the full story here.

- Sam Meredith

Antoine Arnault, LVMH head of communications, discusses third quarter earnings.

Virgin Money shares gained 5.4% in early trade to lead the Stoxx 600, while Swiss software company Temenos plunged more than 19% after issuing a profit warning.

- Elliot Smith

Britain's FTSE 100 is seen around 77 points higher at 6,927, Germany's DAX is set to jump by around 212 points to 12,568 and France's CAC 40 is expected to add around 96 points to 5,975.

— Elliot Smith

The British pound has whipsawed in the past month. First, it fell to an all-time low against the U.S. dollar after the U.K. government announced its "mini-budget." Now, it is at its highest level in a week on reports of a possible major U-turn in government spending plans.

Early Friday, it had ticked lower to trade around $1.131.

Where will it go next?

The median forecast of 22 analysts compiled by CNBC depicts significant sterling weakness in the short-term.

CNBC Pro subscribers can read more here.

— Ganesh Rao